28 Nov My brother died with $37K in debt. What happens now?

Q. My brother died last month, and he always handled the family money. My sister-in-law asked for me to help and I found more than $37,000 in credit card debt and a second mortgage that I don’t think she knows about. It’s unclear if the credit cards are in his name only or both of them and she was only an authorized user. How can I explain this all to her and what is her responsibility?
— Trying to help

A. We’re sorry to hear about this.

What a mess.

When one spouse handles all of the finances and suddenly passes, the burden of digging through the finances may reveal surprising disclosures, said Catherine Romania, an estate planning attorney with Witman Stadtmauer in Florham Park.

“Ignoring or disbelieving the unwanted findings will not make them go away,” she said. “It is best to address them and, if necessary, obtain legal counsel to assist in handling the issues.”

The first question to answer is whether your brother had a will.

If he did, did he appoint your sister-in-law as executor?

“If so, she would need to be appointed by the surrogate. If no will, she would be your brother’s closest heir thus having the right to be appointed administrator of his estate in intestacy,” Romania said.

Once appointed, she would have authority to contact the credit card and mortgage companies to obtain copies of any credit card bills or loan documents in her husband’s name, Romania said. If she is jointly on these debts, she would not need to be appointed in order to acquire information as she would be a co-debtor, she said.

“To the extent the debts are legitimate, and your brother has assets in his name, the creditors may collect on the assets,” Romania said. “However, there is a priority with respect to collection so that funeral bills and other administration expenses are paid first and general credit card liens last. Other lien holders, such as for taxes and Medicaid liens are paid in-between.”

A spouse may be responsible for medical bills and other necessities of a deceased spouse and may also be responsible for tax liabilities if they filed jointly, she said. Similarly, if spouses signed a mortgage, both spouses are joint and severally liable, she said.

Notwithstanding all of that, creditors of a decedent, such as the credit card companies, are willing to compromise debt where it was incurred solely by the decedent and funds are insufficient to meet all the obligations of the decedent, Romania said.

“Your sister-in-law should consider requesting a reduced payment be accepted, or depending on the value of the net estate, that the lien be extinguished. Be aware that calls to collectors are generally recorded,” she said.

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This story was originally published in November 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.